What does my Home Insurance Cover

Purchasing a homeowners insurance policy can be frustrating. What’s worse is that now you have a policy sitting in front of you that is full of numbers, percentages, legal terms and insurance lingo. What does it mean? How do you know if you have the coverage you need?

Having a basic understanding of terms commonly used in homeowners insurance policies can help a lot. Here is a list of the terms that you should review.

Dwelling Coverage: This is the coverage for the home itself. The amount of coverage listed here should at least equal the amount of your mortgage loan, if not exceed it. Remember that this amount represents what the homeowners insurance company thinks it would cost to rebuild your home if it were completely destroyed by a covered loss. On occasion, due to depreciation, it will cost more to replace your home than you paid for it in the first place, so don’t be alarmed if the coverage is above what you paid for your home. Also, if given the choice, choose “similar construction” rather than “common construction.” Similar construction ensures that your home will be rebuilt or repaired to the quality it was before. Common construction means that the work goes to the lowest bidder, which may in turn affect the quality of the repair or rebuild.

Dwelling Extension: Sometimes called “other structures” coverage, this is in place to protect any structure on your property that is not attached to your home, including fences. Usually this coverage is figured on a percentage basis of whatever amount your home is insured for. This means that this coverage may appear on your policy even though you do not have any detached structures.

Personal Property: This coverage provides protection for your personal belongings. A good rule of thumb: If you would put it in a moving truck, it is covered by your personal property coverage. This coverage extends to anywhere your belongings are; in your car, in a storage unit, on an airplane, or wherever else they may be. Your goods are covered anywhere, subject to your deductible. This coverage is also percentage based, usually between 60% and 75% of whatever your home is insured for. It is an “up to” figure, meaning that the insurance company will pay up to that amount in the event of a covered loss, but it is not an automatic amount.

Medical Payments: This coverage provides protection for people who come on your property and become injured. It does not protect you or anyone who lives in your household.

Liability Coverage: If you are found liable for injury caused to someone or the property of someone, then this coverage will pay out up to your selected amount. This coverage excludes liability resulting from an automobile accident, as that coverage would come from your car insurance.

Loss of Use: In the event that your home was uninhabitable due to a covered loss, this coverage would help pay for another place to live until your home was restored to livable conditions. You will be expected to pay your mortgage payment, even though you can’t live in your home, this coverage prevents you from having to cover a mortgage and temporary rent at the same time.

Deductible: This number represents the amount that you will pay out of your own pocket, in the event of a covered loss. Choose a deductible that is affordable to you, even if it means paying a little more in premiums. Having a deductible that you cannot afford will do you no good when you need the coverage.

Knowledge is power. Knowing what these coverages are, and how they benefit you will help you have the peace of mind that your home is protected adequately.